RCI Hospitality Holdings, Inc.
- Company Name
- RCI Hospitality Holdings, Inc.
- Stock Symbol
- Class Period
- August 10, 2017 to May 10, 2019
- Motion Deadline
- July 20, 2019
- Southern District of Texas
The complaint charges RCI Hospitality, its Chief Executive Officer and Chief Financial Officer with violations of the Securities Exchange Act of 1934. RCI Hospitality is a holding company that operates live adult entertainment and/or restaurant and bar operations through its Nightclubs, Bombshells, and Media Group segments. The Company owns and/or operates upscale adult nightclubs serving primarily businessmen and professionals under, among others, the Rick's Cabaret, Jaguars Club, Tootsie's Cabaret, and Kappa Men's Club brands. It also operates restaurants and sports bars under the Bombshells Restaurant & Bar brand and dance clubs under the Studio 80 brand.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, defendants failed to disclose that the Company had engaged in numerous transactions with its CEO, defendant Langan, including lending him significant sums of money, and that these practices were reasonably likely to lead to regulatory scrutiny of the Company and result in investigations into the Company’s governance. As a consequence of this conduct, the Company would be unable to timely file its financial statements. As a result of this information being withheld from the market, RCI Hospitality securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of nearly $35 per share.
On December 11, 2018, RCI Hospitality stated that it could not timely file its annual report with the SEC due to “delays in completing the audit of its financial statements for the year ended September 30, 2018.” On this news, the Company’s share price fell $1.37 per share, or approximately 6%, to close at $22.33 per share on December 12, 2018.
Then, on May 10, 2019, RCI Hospitality stated that it could not timely file its quarterly report with the SEC for the period ended March 31, 2019 due to pending investigations initiated in connection with “negative articles about [the Company] anonymously published in forums associated with the short-selling community” in mid- and late 2018. On this news, the Company’s share price fell $1.67 per share, or over 7%, to close at $20.48 per share on May 13, 2019.